US stock futures drop amid Saudi tensions

Investors suspect developments could undermine the leadership of the crown prince

Saudi Arabia’s crown prince Mohammed bin Salman with US president Donald Trump at the White House.

Saudi Arabia’s crown prince Mohammed bin Salman with US president Donald Trump at the White House.

 

US stock futures pointed to a lower open on Monday, mirroring global stocks, as growing tensions between Western powers and Saudi Arabia added to worries over rising borrowing costs and the impact of tariffs as the earnings season kicks into gear.

Shares of Bank of America reversed losses to trade 0.21 per cent higher premarket after the second-largest US lender’s profit rose more than expected, boosted by lower costs, and as lending growth helped offset lower bond trading revenue.

US president Donald Trump has threatened “severe punishment” if it is found that journalist Jamal Khashoggi, who disappeared on October 2nd, was killed in the Saudi consulate. Saudi Arabia has vowed to retaliate if the West moves to punish the kingdom.

Investors suspect the latest developments could undermine the leadership of crown prince Mohammed bin Salman and has the potential to eventually destabilise the oil-rich kingdom.

“The indices are poised to open the new trading week in the red as tensions between the Saudis and the US mount, dampening the prospects of Friday’s relief rally to extend,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Last week ended on a positive note with the benchmark S&P 500 rebounding after six sessions of losses. But Wall Street still notched its biggest weekly fall since March.

The clearest picture yet of the impact of the US-China trade war will be the third-quarter earnings season, especially the company forecasts. Profits at S&P companies are expected to have risen 21.5 per cent, according to I/B/E/S data from Refinitiv, less than the growth in the past two quarters.

At 7.14am ET, Dow e-minis were down 71 points, or 0.28 per cent; S&P 500 e-minis were down 10.5 points, or 0.38 per cent; and Nasdaq 100 e-minis were down 46.25 points, or 0.64 per cent.

After helping the markets on Friday, shares of the heavily weighted FAANG group dropped. Facebook, Amazon, Apple, Netflix and Google-parent Alphabet were down between 0.2 per cent and 0.9 per cent.

US-listed Chinese stocks were also lower and among the most heavily traded. Alibaba, JD.com, Baidu and Ctrip.com shed between 1.3 per cent and 4.3 per cent.

Sears Holdings plummeted 33.7 per cent after the retailer filed for Chapter 11 bankruptcy, throwing into doubt the future of the company which has withered in the age of internet shopping.

Figures later are expected to show US retail sales rose 0.6 per cent in September, after edging up 0.1 per cent in August. – Reuters